What is the Telecommunication Industry Comps Template?
The telecommunication industry comps template allows investors to compare one telecommunication company to other ones in the same industry. This method helps to determine the relative value of a particular company. This template looks at AT&T, which is one of the largest telecommunication company in the United States.
Here is a quick preview of the telecommunication industry comps template.
How do comparables table work?
A comparables table compares several factors for different companies, which are related to both quality and value. By looking at the comparables table, investors can determine which companies have the best quality at the best price. Creating a comparable table is one of the three main ways of valuing a company, the other two being a discounted cash flow (DCF) and precedent transaction. It is easier to build than a DCF as it requires less information, assumptions and input. It is also more accurate than looking at precedent transactions, which can become outdated easily.
Overall, comparables are quite intuitive and are relatively easy to understand. Since the values created are all on a relative basis, the values are easy to interpret as good or bad.
Choosing comparable companies
To make a useful comps table, the companies chosen must have similar characteristics. For example, a grocery company should not be compared to a telecommunication company. Since the company operate under different conditions, they will have very different profit margins and trading multiples. Typically, a grocery company will have a low profit margin of around 2%. However, that does not mean the grocery stores is not a good investment because all companies within the industry operate with similarly low margin. Thus, in a comparables table, only companies that operate under similar conditions should be used.
Thus, when selecting companies for a comps universe, some things to consider includes:
This template focuses on industry classification, size, and geography. While the other three components are important, they require a deeper dive into a company’s financial statement. Also, trying to find companies with similar growth rate, profitability, and capital structure also require a more careful selection process.
The telecommunication industry is composed of companies that enable people to communicate through far distances. This is done through the phone or internet, with voice, audio, or video. Wireless communication is one of the fastest growing segments within the industry and continues to create faster connections to meet people’s demand. One downside for this industry is that telecommunication companies can be volatile. At times government regulations protect the existing companies by creating barriers to entry. However, other times they can fall behind easily when competitors come up with new technologies. Since communication is always necessary globally, telecoms will remain valuable to investors.